Banks, retailers and miners add to jittery mood

With high-street stores resorting to pre-Christmas discounts and more gloomy property price news, stockmarkets were dragged lower yesterday by falling housebuilders and retailers.

Banks and miners added to the pressure and the FTSE 100 ended down 119.2 points, or 1.9%, at 6277.8. Early pressure came from fears that last week's news of high US inflation could mean the US Federal Reserve might hold off from any more interest rate cuts for now. Worries about global growth prospects kept commodity prices under pressure and that in turn hit the miners.

A flurry of broker downgrades added to the decidedly gloomy mood.

The nervousness of recent weeks shows no signs of going away and any vaguely downbeat news was a cue to sell. Adam Steiner, at SVG Capital, noted a marked mood of short-termism. "People are properly scared," he said. "Time frames have become increasingly narrow, people are dealing on the basis of what will happen tomorrow. It's really almost uncharted territory."

SVG pointed out that smaller stocks had been particularly badly hit in recent months but given their tendency to outperform bigger markets over the long-term, investors will have a good opportunity to pick them up at low prices in the new year. For now, few investors appear to be buying.

On the FTSE 100, the top faller was the can-maker Rexam, still reeling from last week's profit warning, when it flagged up a blow from the weak dollar, and higher energy and freight costs.

Citigroup analysts responded to the trading update yesterday by downgrading the shares. They cut their recommendation to "hold" and their target price to 440p from 575p. They ended down 27p, or 6.4%, at 397p.

Turning to retailers, news of strong footfall over the weekend - meaning a lot of people were in stores but not necessarily buying - did little to ease fears over consumer belt-tightening. Home Retail Group, owner of Argos, lost 19p to 311p; clothes chain Next fell 75p to £16.02, and among the mid-caps there were more sharp falls for Debenhams, down 5.75p, or 7.1%, to 75.5p.

Property price concerns weighed on housebuilders and Barratt lost 22.5p to 449.75p, while Taylor Wimpey dropped 7.9p to 199.1p.

A mixed day for metals left miners lower. Vedanta Resources fell 110p, or 5.2%, to £19.99, Anglo American was down 118p, or 3.8%, to £29.54 and Xstrata lost 140p, or 3.9%, to £34.57.

But there were some risers worth flagging. The publishing and exhibitions group Reed Elsevier was in favour after analysts at Credit Suisse recommended switching to the shares out of its rival Pearson. They have an outperform rating and a target price of 710p for Reed but underperform on the FT and school books publisher, Pearson.

The bank said Reed had lower cyclical exposure than Pearson, and Reed has been a net seller of assets at "the top of the cycle" whereas Pearson had bought. Pearson shed 8p to 700.5p, while Reed climbed 7.5p to 648p.

Another riser on a down day was the cruise ship operator Carnival. The group reports fourth-quarter results on Thursday and analysts at Collins Stewart say in a preview note that they are "confident that Q4 guidance will be achieved". They flag up previous reports of strong forward bookings and have a "buy" recommendation on the shares with a target price of £28.61.

Collins Stewart's analyst Andrew Fitchie said: "Whilst its exposures to the oil price and consumer-discretionary spend are likely to remain out of favour in the near term, there is no doubting that Carnival is fundamentally cheap." The shares ended up 3p at £21.89.

On Aim, there was positive news around Dori Media Group, an Israeli-based media company that makes and distributes tele-novelas. Dori said it expected to generate $2.6m (£1.3m) in sales from new contracts after selling almost 2,000 hours of series and formats to international broadcasters at a recent TV festival. That comes on top of $3.7m of sales already agreed. The shares ended at 162.5p, flat on the day but they have more than doubled this year.

Palm oil prospects

Soft commodities have been in vogue for a while and for those who want to get into them via the stockmarkets, a new company made its London Stock Exchangedebut yesterday. New Britain Palm Oil Ltd had a tough day to start out on, with the market selling off across most sectors. But it finished its first day of dealings up 42.5p, at 292.5p. The shares were placed by Kaupthing at 250p. NBPO has become the largest of the quoted players in the palm oil market and while it does not sell into the lucrative Chinese and Indian markets yet, that option is keeping the company on investors' radars.